Entrepreneurship and the Economic Theory of the Firm

OPEN ARCHIVE

Union Jack
Dannebrog

Entrepreneurship and the Economic Theory of the Firm

Show full item record

Title: Entrepreneurship and the Economic Theory of the Firm
Any Gains from Trade
Author: Foss, Nicolai J.; Klein, Peter G.
Abstract: Although they have developed very much in isolation from each other, we argue the theory of entrepreneurship and the economic theory of the firm are closely related, and each has much to learn from the other. In particular, the notion of entrepreneurship as judgment associated with Frank Knight and some Austrian school economists aligns naturally with the theory of the firm. In this perspective, the entrepreneur needs a firm, that is, a set of alienable assets he controls, to carry out his function. We further show how this notion of judgment adds to the key themes in the modern theory of the firm (i.e., the existence, boundaries, and internal organization). In our approach, resource uses are not data, but are created as entrepreneurs envision new ways of using assets to produce goods. The entrepreneur’s decision problem is aggravated by the fact that capital assets are heterogeneous. Asset ownership facilitates experimenting entrepreneurship: Acquiring a bundle of property rights is a low cost means of carrying out commercial experimentation. In this approach, the existence of the firm may be understood in terms of limits to the market for judgment relating to novel uses of heterogeneous assets; and the boundaries of the firm, as well as aspects of internal organization, may be understood as being responsive to entrepreneurial processes of experimentation. Key words: Entrepreneurship, heterogeneous assets, judgment, ownership, firm boundaries, internal organization. JEL Codes: B53, D23, L2
URI: http://hdl.handle.net/10398/6429
Date: 2004-11-02

Creative Commons License This work is licensed under a Creative Commons License.

Files Size Format View
04-12.pdf 335.6Kb PDF View/Open

This item appears in the following Collection(s)

Show full item record